11. Refer to Problem 10 and the computer solution shown in Figure 3.16. a. Suppose the risk index for the stock fund (the value of Cs) increases from its current value of 8 to 12. How does the optimal solution change, if at all? b. Suppose the risk index for the money market fund (the value of CM) increases from its current value of 3 to 3.5. How does the optimal solution change, if at all? c. Suppose Cs increases to 12 and CM increases to 3.5. How does the optimal solution change, if at all?

Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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I need question 11, question 10 is only for background information 

FIGURE 3.16 THE SOLUTION FOR THE INNIS INVESTMENTS PROBLEM
Optimal Objective Value =
62000.00000
Variable
Value
Reduced Cost
4000.00000
0.00000
M
10000.00000
0.00000
Constraint
Slack/Surplus
Dual Value
0.00000
-0.05667
2
0.00000
2.16667
7000.00000
0.00000
Objective
Allowable
Allowable
Variable
Coefficient
Increase
Decrease
8.00000
Infinite
4.25000
M
3.00000
3.40000
Infinite
RHS
Allowable
Allowable
Constraint
Value
Increase
Decrease
-----
1200000.00000
300000.00000
420000.00000
2
60000.00000
42000.00000
12000.00000
3000.00000
7000.00000
Infinite
11. Refer to Problem 10 and the computer solution shown in Figure 3.16.
a. Suppose the risk index for the stock fund (the value of Cs) increases from its current
value of 8 to 12. How does the optimal solution change, if at all?
b. Suppose the risk index for the money market fund (the value of CM) increases from its
current value of 3 to 3.5. How does the optimal solution change, if at all?
c. Suppose Cs increases to 12 and CM increases to 3.5. How does the optimal solution
change, if at all?
IN3M
Transcribed Image Text:FIGURE 3.16 THE SOLUTION FOR THE INNIS INVESTMENTS PROBLEM Optimal Objective Value = 62000.00000 Variable Value Reduced Cost 4000.00000 0.00000 M 10000.00000 0.00000 Constraint Slack/Surplus Dual Value 0.00000 -0.05667 2 0.00000 2.16667 7000.00000 0.00000 Objective Allowable Allowable Variable Coefficient Increase Decrease 8.00000 Infinite 4.25000 M 3.00000 3.40000 Infinite RHS Allowable Allowable Constraint Value Increase Decrease ----- 1200000.00000 300000.00000 420000.00000 2 60000.00000 42000.00000 12000.00000 3000.00000 7000.00000 Infinite 11. Refer to Problem 10 and the computer solution shown in Figure 3.16. a. Suppose the risk index for the stock fund (the value of Cs) increases from its current value of 8 to 12. How does the optimal solution change, if at all? b. Suppose the risk index for the money market fund (the value of CM) increases from its current value of 3 to 3.5. How does the optimal solution change, if at all? c. Suppose Cs increases to 12 and CM increases to 3.5. How does the optimal solution change, if at all? IN3M
10. Recall the Innis Investments problem (Chapter 2, Problem 39). Letting
S = units purchased in the stock fund
M = units purchased in the money market fund
leads to the following formulation:
Min
8S +
3M
s.t.
50S + 100M < 1,200,000
Funds available
5S +
4M >
60,000
Annual income
3,000
Units in money market
S, M > 0
The computer solution is shown in Figure 3.16.
a. What is the optimal solution, and what is the minimum total risk?
b. Specify the objective coefficient ranges.
c. How much annual income will be earned by the portfolio?
d. What is the rate of return for the portfolio?
e. What is the dual value for the funds available constraint?
f. What is the marginal rate of return on extra funds added to the portfolio?
Transcribed Image Text:10. Recall the Innis Investments problem (Chapter 2, Problem 39). Letting S = units purchased in the stock fund M = units purchased in the money market fund leads to the following formulation: Min 8S + 3M s.t. 50S + 100M < 1,200,000 Funds available 5S + 4M > 60,000 Annual income 3,000 Units in money market S, M > 0 The computer solution is shown in Figure 3.16. a. What is the optimal solution, and what is the minimum total risk? b. Specify the objective coefficient ranges. c. How much annual income will be earned by the portfolio? d. What is the rate of return for the portfolio? e. What is the dual value for the funds available constraint? f. What is the marginal rate of return on extra funds added to the portfolio?
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